Argent announces revised strategic direction, including distribution adjustment, updated 2014 plan and senior management changes
CALGARY, April 10, 2014 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) announces a change in strategic direction and provides details of its 2014 updated capital expenditure and production forecast following its recent Board of Directors meeting on April 9, 2014. With recent market activity resulting in a significantly lower unit price, the Trust's balanced financial structure has changed significantly. The original model of double digit yield and growth is not supported in the current market, and as such, management believes changes must be incorporated into the forward strategic direction. The following actions are intended to strengthen Argent's financial position and sustainability:
Premium DRIP Suspension
Argent's unit price has severely declined over the past few weeks, from close to a Net Asset Value (NAV) trading valuation to the current significantly lower unit price level. At present unit price levels, the Premium Dividend Reinvestment Program ("Premium DRIP") has become significantly dilutive to unitholders. Therefore, the Board of Directors has directed the suspension of the Trust's Premium DRIP program, effective immediately.
The Premium DRIP program provided significant additional cash flow to the Trust to fund both the distribution and capital program, and as such, the suspension of the Premium DRIP program creates a substantial change in the Trust's financial structure and financing capabilities. As a result, the Trust is reducing its distribution level to $0.24 per unit per year ($0.02 per unit per month).
2014 Capital Budget and Production Guidance
The Trust is reducing its 2014 capital program to US$55 million (including US$45 million for drilling and US$10 million in maintenance) from US$70 million (including US$60 million for drilling and US$10 million in maintenance) and reducing annual production guidance to a 2014 average production level of approximately 6,000 boe/d (68% oil and NGLs). The approximate 6,000 boe/d production guidance for 2014 represents a more modest growth rate of 7% over 2013 average production of 5,591 boe/d.
The Trust is committed to and continues to reduce operating costs in the field and general and administrative expenses in both Houston and Calgary.
We believe the reduction in capital spending and the expected administrative and operating cost reductions in combination with the reduction in the distribution level will strike a more reasonable balance between yield and growth allowing prudent investment into Argent's asset base in a more sustainable manner, with expected improving payout and sustainability ratios going forward.
As communicated previously, the Trust is actively reviewing the monetization of a portion of its assets to reduce indebtedness. In keeping with this review, the Trust has engaged an Agent and is in the process of selling a production payment it receives on third party acreage. This production payment is not presently recognized in Argent's current borrowing base, and as such, the sale is not expected to impact Argent's borrowing base.
Changes in Senior Management
With the change in strategic direction and cost reduction initiatives, there are a number of executive position rationalizations.
Argent is announcing the resignation, effective April 30, 2014, of Brian Prokop as Chief Executive Officer. John Elzner, currently President, will become President and CEO, and a Director of the Trust.
Management and the Board of Directors wish to thank Mr. Prokop for his contributions since the formation of the Trust. He has been deeply committed to the success of the Trust and instrumental in the significant growth through acquisition, access to capital and investor interactions. The Board is very pleased that he will be available to the Trust as needed in the future, and sincerely wishes him well in his future endeavours.
Additionally, Eric Tremblay will transition from Executive Chairman to Chairman of the Trust and forego all executive compensation effective April 30, 2014.
Furthermore, the Board of Directors has agreed to forego all incentive based compensation in the current year.
Conference Call Details
Management of Argent will host a conference call for investors, financial analysts, media and any interested persons on Friday, April 11, 2014 at 9:00 a.m. MST (11:00 a.m. EST) to discuss the new strategic direction. An updated presentation will be available in concert with the conference call on the Argent website at www.argentenergytrust.com. The conference call details are as follows:
To participate in the live call please use one of the following methods:
|Dial toll free from Canada or the US:||888-390-0605|
|Dial from outside Canada or the US:||416-764-8609|
Participants should dial in five to ten minutes before the call.
The conference call will be recorded and available until April 18, 2014 at 23:59 EST. You can listen to an archive of the call by dialing in:
|Dial toll free from Canada or the US:||888-390-0541|
|Dial from outside Canada or the US:||416-764-8677|
Argent is a mutual fund trust under the Income Tax Act (Canada) (the "Tax Act"). Argent's objective is to create stable, consistent returns for investors through the acquisition and development of oil and natural gas reserves and production with low risk exploration potential, located primarily in the United States. Material information pertaining to Argent Energy Trust may be found on www.sedar.com or www.argentenergytrust.com.
This press release contains statements that are forward looking. Investors should read the Note Regarding Forward- Looking Statements at the end of this press release. In this press release, references to "Argent" or the "Trust" include the Trust and its operating subsidiaries.
Note about forward-looking statements
This press release includes forward-looking information within the meaning of applicable Canadian and United States securities legislation. All statements, other than statements of historical facts, that address activities, circumstances, events, outcomes and other matters that Argent budgets, forecasts, plans, projects, estimates, expects, believes, assumes or anticipates (and other similar expressions) will, should or may occur in the future, are considered forward-looking information.
In particular, forward-looking information contained in this press release includes, but is not limited to, Argent's capital program and budget, drilling and completion plans, ability to improve drilling and operational efficiencies, ability to add to or maintain oil, natural gas and NGL production rates, ability to reduce operating and administrative costs, the payment of cash distributions by the Trust, the Trust's ability to reduce indebtedness, source of funding for capital expenditures, sustainability and payout ratios, the Trust's expectation regarding its average working interest production and average production rate for the year 2014, the Trust's ability to sustain production and distribution, and the ability to monetize a portion of its assets. With respect to forward-looking statements contained in this press release, assumptions have been made regarding, among other things, future oil and natural gas prices, future currency exchange and interest rates, the regulatory framework governing taxes in the US and Canada and the Trust's status as a "mutual fund trust" and not a "SIFT trust", estimates of anticipated production from the Trust's assets, which estimates are based on the proposed drilling and completion program with a success rate that, in turn, is based upon historical drilling and completion success and an evaluation of the particular wells to be drilled and completed, future recoverability of reserves from the assets, future capital expenditures and the ability of the Trust to obtain financing on acceptable terms for its capital projects, the level of participation in the Trust's DRIP program and the Trust's capital budget (which is subject to change in light of ongoing results, prevailing economic circumstances, commodity prices and industry conditions and regulations). Unlike fixed income securities, Argent has no obligation to distribute any fixed amount and reductions in, or suspension of, cash distributions may occur that would reduce future yield.
The forward-looking information provided in this press release is based on management's current beliefs, expectations and assumptions, based on currently available information as to the outcome and timing of future events. Argent cautions that its future oil, natural gas and natural gas liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing and amount of future capital expenditures, and other forward-looking information is subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas.
These risks include, but are not limited to, oil and natural gas price volatility, Argent's access to cash flows and other sources of liquidity to fund its capital expenditures, its level of indebtedness, its ability to replace production, the impact of the current financial climate on Argent's anticipated business and financial condition, a lack of availability of or increases in costs of goods and services, a lack of performance of its staff or ability to retain experienced personnel, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating future oil and gas production or reserves, economic conditions and other risks as described in documents and reports that Argent files with the securities commissions or similar authorities in applicable Canadian jurisdictions on the System for Electronic Document Analysis and Retrieval (SEDAR). Any of these factors could cause Argent's actual results and plans to differ materially from those contained in the forward-looking information.
There are many factors that could result in production levels being less than anticipated, including greater than anticipated declines in existing production due to poor reservoir performance, the unanticipated encroachment of water or other fluids into the producing formation, mechanical failures or human error or inability to access production facilities, among other factors.
Forward-looking information is subject to a number of risks and uncertainties, including those mentioned above, that could cause actual results to differ materially from the expectations set forth in the forward-looking information. Forward-looking information is not a guarantee of future performance or an assurance that our current assumptions and projections are valid. All forward-looking information speaks only as of the date of this press release, and Argent assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking information, except as required by law. You should not place undue reliance on forward-looking information. You are encouraged to closely consider the additional disclosures and risk factors contained in Argent's periodic filings on SEDAR that discuss in further detail the factors that could cause future results to be different than contemplated in this press release.
Note regarding barrel of oil equivalency
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf to one bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of six to one, utilizing a boe conversion ratio of six Mcf to one bbl may be misleading as an indication of value.
Argent is a mutual fund trust under the Income Tax Act (Canada) (the "Tax Act"). Argent's objective is to create stable, consistent returns for investors through the acquisition and development of oil and natural gas reserves and production with low risk exploration potential, located primarily in the United States. Material information pertaining to Argent Energy Trust may be found on www.sedar.com or www.argentenergytrust.com
SOURCE Argent Energy TrustFor further information:
Chief Financial Officer
Manager, Investor Relations